Lincoln Electric Reports Third Quarter 2016 Results
| Third Quarter 2016 Highlights |
| • Operating income margin of 14.4% • Solid cash flow from operations and cash conversion of net income (1) • Returned $107 million to shareholders through dividends and share repurchases |
CLEVELAND, Oct. 21, 2016 (GLOBE NEWSWIRE) -- Lincoln Electric Holdings, Inc. (the “Company”) (Nasdaq: LECO) today reported third quarter 2016 net income of $60.0 million, or diluted earnings per share (EPS) of $0.89 which includes a $4.0 million, or $0.06 EPS benefit from a discrete income tax item. This compares with net losses of $60.5 million, or $(0.82) EPS, in the comparable 2015 period due to after-tax special item charges of $126.7 million, or $1.71 EPS. On an adjusted basis, net income for third quarter 2015 was $66.2 million, or $0.89 EPS.
Third quarter 2016 sales decreased 12.0% to $567.6 million as a 2.1% benefit from acquisitions was offset by 12.8% lower volumes, a 0.7% decrease in price and a 0.6% unfavorable impact from foreign exchange translation. Excluding Venezuela from prior year results due to the recent deconsolidation of the operation, sales decreased 7.0%, primarily from 7.8% lower volumes.
Operating income for the third quarter 2016 was $81.8 million, or 14.4% of sales, reflecting favorable mix and lower costs. This compares with operating losses of $84.0 million in the comparable 2015 period which included special items related to pension settlement charges, Venezuelan currency remeasurement losses and rationalization and impairment charges. On an adjusted basis, third quarter 2015 operating income was $97.1 million or 15.1% of sales.
“We are pleased to report solid margin performance in the quarter,” stated Christopher L. Mapes, Chairman, President and Chief Executive Officer. “As we navigate through this challenging portion of the cycle, our year-over-year sales performance continues to improve on easier comparisons and successful commercial initiatives in the equipment product line. While market trends remain mixed, we are focused on cost controls, productivity, and positioning Lincoln Electric for long-term success.”
(1) Cash conversion is defined as Net cash provided by operating activities less Capital expenditures divided by Net income.
Nine Months 2016 Summary
Net income for the nine months ended September 30, 2016 was $145.0 million, or EPS of $2.11, which includes an after-tax special item benefit of $7.2 million, or $0.10 EPS, due to the reversal of an income tax valuation allowance and a $33.3 million charge, or $0.48 EPS, from the deconsolidation of the Venezuelan subsidiary. This compares with net income of $78.8 million, or EPS of $1.04, in the comparable 2015 period. Adjusted net income for the nine months ended September 30, 2016 was $171.1 million, or adjusted EPS of $2.49, compared with adjusted net income of $206.4 million, or adjusted EPS of $2.72, in 2015.
Sales decreased 13.1% to $1.7 billion in the nine months ended September 30, 2016 primarily due to unfavorable foreign exchange translation and lower volumes. This compares with $2.0 billion in sales in the comparable 2015 period. Excluding Venezuela from prior year results, sales decreased 9.9%, primarily from lower volumes. Operating income was $205.2 million, or 12.0% of sales, as compared with $103.3 million, or 5.2% of sales, in the comparable 2015 period. Adjusted operating income was $239.6 million or 14.0% of sales, compared with $285.6 million, or 14.5% of sales in 2015.
Venezuela Deconsolidation
Effective June 30, 2016, the Company deconsolidated the financial results of its Venezuela subsidiary and began reporting its results using the cost method of accounting. As a result, Venezuela is no longer included in the consolidated financial statements in the current period starting in the third quarter of 2016. In the third quarter of 2015 Venezuela contributed $34.7 million of Net sales and incurred a $16.8 million loss in Gross profit due to a $22.2 million special item charge in Cost of goods sold related to the remeasurement of the Venezuela currency. Excluding this charge, Venezuela contributed $5.3 million in Gross profit.
Dividend and Share Repurchases The Company’s Board of Directors declared a 9.4% increase in the quarterly cash dividend, from $0.32 per share to $0.35, or $1.40 per share on an annual basis. The declared quarterly cash dividend of $0.35 per share is payable January 13, 2017 to shareholders of record as of December 31, 2016.
During the third quarter, the Company returned $107.2 million to shareholders through dividends and the repurchase of 1.4 million of the Company’s common shares. The Company is maintaining its 2016 share repurchase target of $400 million of the Company’s common shares.
Financing Activities On October 20, 2016, the Company issued Senior Unsecured Notes (the "2016 Notes") in the aggregate principal amount of $350 million through a private placement. The 2016 Notes have maturities ranging from 12 to 25 years with a weighted average effective interest rate of 3.1% and a weighted average term of 18 years. The proceeds will be used for general corporate purposes.
Webcast Information
A conference call to discuss third quarter 2016 financial results will be webcast live today, October 21, 2016, at 10:00 a.m., Eastern Time. This webcast is accessible at http://ir.lincolnelectric.com. Listeners should go to the web site prior to the call to register, download and install any necessary audio software. A replay of the webcast will be available on the Company's web site.
Investors who are unable to access the webcast may listen to the conference call live by telephone by dialing (877) 344-3899 (domestic) or (315) 625-3087 (international) and use confirmation code 90839034. Telephone participants are asked to dial in 10-15 minutes prior to the start of the conference call.
Financial results for the third quarter 2016 can also be obtained at http://ir.lincolnelectric.com.
About Lincoln Electric
Lincoln Electric is the world leader in the design, development and manufacture of arc welding products, robotic arc welding systems, plasma and oxy-fuel cutting equipment and has a leading global position in the brazing and soldering alloys market. Headquartered in Cleveland, Ohio, Lincoln has 48 manufacturing locations, including operations and joint ventures in 19 countries and a worldwide network of distributors and sales offices covering more than 160 countries. For more information about Lincoln Electric and its products and services, visit the Company’s website at www.lincolnelectric.com.
Non-GAAP Information
Adjusted operating income, Adjusted net income, Adjusted diluted earnings per share and Return on invested capital are non-GAAP financial measures. Management uses non-GAAP measures to assess the Company's operating performance by excluding certain disclosed special items that management believes are not representative of the Company's core business. Management believes that excluding these special items enables them to make better period-over-period comparisons and benchmark the Company's operational performance against other companies in its industry more meaningfully. Furthermore, management believes that non-GAAP financial measures provide investors with meaningful information that provides a more complete understanding of Company operating results and enables investors to analyze financial and business trends more thoroughly. Non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures and have limitations including, but not limited to, their usefulness as comparative measures as other companies may define their non-GAAP measures differently.
| Lincoln Electric Holdings, Inc. | |||||||||||||||||||||
| Financial Highlights | |||||||||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Consolidated Statements of Income | Three Months Ended September 30, | Fav (Unfav) to Prior Year | |||||||||||||||||||
| 2016 | % of Sales | 2015 | % of Sales | $ | % | ||||||||||||||||
| Net sales | $ | 567,646 | 100.0 | % | $ | 645,166 | 100.0 | % | $ | (77,520 | ) | (12.0 | %) | ||||||||
| Cost of goods sold | 367,834 | 64.8 | % | 446,272 | 69.2 | % | 78,438 | 17.6 | % | ||||||||||||
| Gross profit | 199,812 | 35.2 | % | 198,894 | 30.8 | % | 918 | 0.5 | % | ||||||||||||
| Selling, general & administrative expenses | 117,983 | 20.8 | % | 128,299 | 19.9 | % | 10,316 | 8.0 | % | ||||||||||||
| Rationalization and asset impairment charges | — | — | 18,285 | 2.8 | % | 18,285 | 100.0 | % | |||||||||||||
| Pension settlement charges | — | — | 136,331 | 21.1 | % | 136,331 | 100.0 | % | |||||||||||||
| Operating income (loss) | 81,829 | 14.4 | % | (84,021 | ) | (13.0 | %) | 165,850 | 197.4 | % | |||||||||||
| Interest income | 360 | 0.1 | % | 692 | 0.1 | % | (332 | ) | (48.0 | %) | |||||||||||
| Equity earnings in affiliates | 619 | 0.1 | % | 310 | — | 309 | 99.7 | % | |||||||||||||
| Other income | 1,303 | 0.2 | % | 296 | — | 1,007 | 340.2 | % | |||||||||||||
| Interest expense | (3,815 | ) | (0.7 | %) | (5,803 | ) | (0.9 | %) | 1,988 | 34.3 | % | ||||||||||
| Income (loss) before income taxes | 80,296 | 14.1 | % | (88,526 | ) | (13.7 | %) | 168,822 | 190.7 | % | |||||||||||
| Income taxes | 20,257 | 3.6 | % | (28,045 | ) | (4.3 | %) | (48,302 | ) | (172.2 | %) | ||||||||||
| Effective tax rate | 25.2 | % | 31.7 | % | 6.5 | % | |||||||||||||||
| Net income (loss) including non-controlling interests | 60,039 | 10.6 | % | (60,481 | ) | (9.4 | %) | 120,520 | 199.3 | % | |||||||||||
| Non-controlling interests in subsidiaries’ loss | (10 | ) | — | (15 | ) | — | 5 | 33.3 | % | ||||||||||||
| Net income (loss) | $ | 60,049 | 10.6 | % | $ | (60,466 | ) | (9.4 | %) | $ | 120,515 | 199.3 | % | ||||||||
| Basic earnings (loss) per share | $ | 0.90 | $ | (0.82 | ) | $ | 1.72 | 209.8 | % | ||||||||||||
| Diluted earnings (loss) per share | $ | 0.89 | $ | (0.82 | ) | $ | 1.71 | 208.5 | % | ||||||||||||
| Weighted average shares (basic) | 66,477 | 73,754 | |||||||||||||||||||
| Weighted average shares (diluted) | 67,182 | 73,754 | |||||||||||||||||||
| Nine Months Ended September 30, | Fav (Unfav) to Prior Year | ||||||||||||||||||||
| 2016 | % of Sales | 2015 | % of Sales | $ | % | ||||||||||||||||
| Net sales | $ | 1,710,786 | 100.0 | % | $ | 1,967,806 | 100.0 | % | $ | (257,020 | ) | (13.1 | %) | ||||||||
| Cost of goods sold | 1,118,945 | 65.4 | % | 1,322,741 | 67.2 | % | 203,796 | 15.4 | % | ||||||||||||
| Gross profit | 591,841 | 34.6 | % | 645,065 | 32.8 | % | (53,224 | ) | (8.3 | %) | |||||||||||
| Selling, general & administrative expenses | 352,290 | 20.6 | % | 385,945 | 19.6 | % | 33,655 | 8.7 | % | ||||||||||||
| Rationalization and asset impairment charges | — | — | 19,524 | 1.0 | % | 19,524 | 100.0 | % | |||||||||||||
| Pension settlement charges | — | — | 136,331 | 6.9 | % | 136,331 | 100.0 | % | |||||||||||||
| Loss on deconsolidation of Venezuelan subsidiary | 34,348 | 2.0 | % | — | — | (34,348 | ) | (100.0 | %) | ||||||||||||
| Operating income (loss) | 205,203 | 12.0 | % | 103,265 | 5.2 | % | 101,938 | 98.7 | % | ||||||||||||
| Interest income | 1,225 | 0.1 | % | 2,023 | 0.1 | % | (798 | ) | (39.4 | %) | |||||||||||
| Equity earnings in affiliates | 2,084 | 0.1 | % | 2,138 | 0.1 | % | (54 | ) | (2.5 | %) | |||||||||||
| Other income | 2,552 | 0.1 | % | 3,223 | 0.2 | % | (671 | ) | (20.8 | %) | |||||||||||
| Interest expense | (11,828 | ) | (0.7 | %) | (12,034 | ) | (0.6 | %) | 206 | 1.7 | % | ||||||||||
| Income (loss) before income taxes | 199,236 | 11.6 | % | 98,615 | 5.0 | % | 100,621 | 102.0 | % | ||||||||||||
| Income taxes | 54,264 | 3.2 | % | 19,902 | 1.0 | % | (34,362 | ) | (172.7 | %) | |||||||||||
| Effective tax rate | 27.2 | % | 20.2 | % | (7.0 | %) | |||||||||||||||
| Net income (loss) including non-controlling interests | 144,972 | 8.5 | % | 78,713 | 4.0 | % | 66,259 | 84.2 | % | ||||||||||||
| Non-controlling interests in subsidiaries’ loss | (32 | ) | — | (73 | ) | — | 41 | 56.2 | % | ||||||||||||
| Net income (loss) | $ | 145,004 | 8.5 | % | $ | 78,786 | 4.0 | % | $ | 66,218 | 84.0 | % | |||||||||
| Basic earnings (loss) per share | $ | 2.13 | $ | 1.05 | $ | 1.08 | 102.9 | % | |||||||||||||
| Diluted earnings (loss) per share | $ | 2.11 | $ | 1.04 | $ | 1.07 | 102.9 | % | |||||||||||||
| Weighted average shares (basic) | 68,081 | 74,999 | |||||||||||||||||||
| Weighted average shares (diluted) | 68,784 | 75,764 | |||||||||||||||||||
| Lincoln Electric Holdings, Inc. | ||||||||||
| Financial Highlights | ||||||||||
| (In thousands) | ||||||||||
| (Unaudited) | ||||||||||
| Balance Sheet Highlights | ||||||||||
| Selected Consolidated Balance Sheet Data | September 30, 2016 | December 31, 2015 | ||||||||
| Cash and cash equivalents | $ | 256,928 | $ | 304,183 | ||||||
| Total current assets | 920,478 | 935,995 | ||||||||
| Property, plant and equipment, net | 384,817 | 411,323 | ||||||||
| Total assets | 1,833,821 | 1,784,171 | ||||||||
| Total current liabilities | 596,059 | 370,122 | ||||||||
| Short-term debt (1) | 183,827 | 4,278 | ||||||||
| Long-term debt, less current portion | 359,831 | 350,347 | ||||||||
| Total equity | 752,917 | 932,448 | ||||||||
| Operating Working Capital | September 30, 2016 | December 31, 2015 | ||||||||
| Accounts receivable | $ | 281,039 | $ | 264,715 | ||||||
| Inventory | 285,199 | 275,930 | ||||||||
| Trade accounts payable | 164,783 | 152,620 | ||||||||
| Operating working capital | $ | 401,455 | $ | 388,025 | ||||||
| Operating working capital to net sales (2) | 17.7 | % | 17.1 | % | ||||||
| Invested Capital | September 30, 2016 | December 31, 2015 | ||||||||
| Short-term debt (1) | $ | 183,827 | $ | 4,278 | ||||||
| Long-term debt, less current portion | 359,831 | 350,347 | ||||||||
| Total debt | 543,658 | 354,625 | ||||||||
| Total equity | 752,917 | 932,448 | ||||||||
| Invested capital | $ | 1,296,575 | $ | 1,287,073 | ||||||
| Total debt / invested capital | 41.9 | % | 27.6 | % | ||||||
| (1) Includes current portion of long-term debt. |
| (2) Operating working capital to net sales is defined as operating working capital divided by annualized rolling three months of net sales. |
| Lincoln Electric Holdings, Inc. | ||||||||||||||||
| Financial Highlights | ||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Non-GAAP Financial Measures | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Operating income (loss) as reported | $ | 81,829 | $ | (84,021 | ) | $ | 205,203 | $ | 103,265 | |||||||
| Special items (pre-tax): | ||||||||||||||||
| Rationalization and asset impairment charges (1) | — | 18,285 | — | 19,524 | ||||||||||||
| Loss on deconsolidation of Venezuelan subsidiary (2) | — | — | 34,348 | — | ||||||||||||
| Venezuela foreign exchange losses (3) | — | 26,506 | — | 26,506 | ||||||||||||
| Pension settlement charges (4) | — | 136,331 | — | 136,331 | ||||||||||||
| Adjusted operating income (loss) (6) | $ | 81,829 | $ | 97,101 | $ | 239,551 | $ | 285,626 | ||||||||
| As a percent of total sales | 14.4 | % | 15.1 | % | 14.0 | % | 14.5 | % | ||||||||
| Net income (loss) as reported | $ | 60,049 | $ | (60,466 | ) | $ | 145,004 | $ | 78,786 | |||||||
| Special items (after-tax): | ||||||||||||||||
| Rationalization and asset impairment charges (1) | — | 16,832 | — | 17,732 | ||||||||||||
| Loss on deconsolidation of Venezuelan subsidiary (2) | — | — | 33,251 | — | ||||||||||||
| Venezuela foreign exchange losses (3) | — | 26,506 | — | 26,506 | ||||||||||||
| Pension settlement charges (4) | — | 83,341 | — | 83,341 | ||||||||||||
| Income tax valuation reversals (5) | — | — | (7,196 | ) | — | |||||||||||
| Adjusted net income (6) | $ | 60,049 | $ | 66,213 | $ | 171,059 | $ | 206,365 | ||||||||
| Diluted earnings (loss) per share as reported | $ | 0.89 | $ | (0.82 | ) | $ | 2.11 | $ | 1.04 | |||||||
| Special items | — | 1.71 | 0.38 | 1.68 | ||||||||||||
| Adjusted diluted earnings per share (6) | $ | 0.89 | $ | 0.89 | $ | 2.49 | $ | 2.72 | ||||||||
| Weighted average shares (diluted) | 67,182 | 74,460 | 68,784 | 75,764 | ||||||||||||
| (1 | ) | The three and nine months ended September 30, 2015 include net charges primarily related to severance and other related costs and charges related to the impairment of long-lived assets and goodwill. | |
| (2 | ) | The nine months ended September 30, 2016 reflect a charge (non-cash charge of $34.1 million pretax and $33.0 million after-tax) related to the deconsolidation of the Company's Venezuelan subsidiary in the second quarter 2016. | |
| (3 | ) | The three and nine months ended September 30, 2015 represent the impact of Venezuelan remeasurement losses related to the adoption of new foreign exchange mechanisms. | |
| (4 | ) | The three and nine months ended September 30, 2015 include pension settlement charges primarily related to the purchase of a group annuity contract. | |
| (5 | ) | The nine months ended September 30, 2016 reflect reduced income tax expense related to the reversal of an income tax valuation allowance as a result of a legal entity change to realign the Company’s tax structure. | |
| (6 | ) | Adjusted operating income, Adjusted net income and Adjusted diluted earnings per share are non-GAAP financial measures. Management uses non-GAAP measures to assess the Company's operating performance by excluding certain disclosed special items that management believes are not representative of the Company's core business. Management believes that excluding these special items enables them to make better period-over-period comparisons and benchmark the Company's operational performance against other companies in its industry more meaningfully. Furthermore, management believe that non-GAAP financial measures provide investors with meaningful information that provides a more complete understanding of Company operating results and enables investors to analyze financial and business trends more thoroughly. Non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures and have limitations including, but not limited to, their usefulness as comparative measures as other companies may define their non-GAAP measures differently. |
| Lincoln Electric Holdings, Inc. | ||||||||
| Financial Highlights | ||||||||
| (In thousands, except per share amounts) | ||||||||
| (Unaudited) | ||||||||
| Non-GAAP Financial Measures | ||||||||
| Twelve Months Ended September 30, | ||||||||
| Return on Invested Capital | 2016 | 2015 | ||||||
| Net income as reported | $ | 193,696 | $ | 153,998 | ||||
| Rationalization and asset impairment charges (gains), net of tax of ($16) and $1,791 in 2016 and 2015, respectively | 450 | 17,899 | ||||||
| Loss on deconsolidation of Venezuelan subsidiary, net of tax of $1,097 | 33,251 | — | ||||||
| Income tax valuation reversals | (7,196 | ) | — | |||||
| Pension settlement charges, net of tax of $2,438 and $52,990 in 2016 and 2015, respectively | 3,969 | 83,341 | ||||||
| Venezuela currency devaluation | 708 | 26,506 | ||||||
| Adjusted net income (1) | $ | 224,878 | $ | 281,744 | ||||
| Plus: Interest expense, net of tax of $6,816 and $7,174 in 2016 and 2015, respectively | 13,342 | 11,564 | ||||||
| Less: Interest income, net of tax of $596 and $1,015 in 2016 and 2015, respectively | 1,182 | 1,636 | ||||||
| Adjusted net income before tax effected interest | $ | 237,038 | $ | 291,672 | ||||
| Invested Capital | September 30, 2016 | September 30, 2015 | ||||||
| Short-term debt | $ | 183,827 | $ | 2,453 | ||||
| Long-term debt, less current portion | 359,831 | 350,899 | ||||||
| Total debt | 543,658 | 353,352 | ||||||
| Total equity | 752,917 | 1,011,969 | ||||||
| Invested capital | $ | 1,296,575 | $ | 1,365,321 | ||||
| Return on invested capital (1)(2) | 18.3 | % | 21.4 | % | ||||
| (1 | ) | Adjusted net income and Return on invested capital are non-GAAP financial measures. Management uses non-GAAP measures to assess the Company's operating performance by excluding certain disclosed special items that management believes are not representative of the Company's core business. Management believes that excluding these special items enables them to make better period-over-period comparisons and benchmark the Company's operational performance against other companies in its industry more meaningfully. Furthermore, management believe that non-GAAP financial measures provide investors with meaningful information that provides a more complete understanding of Company operating results and enables investors to analyze financial and business trends more thoroughly. Non-GAAP financial measures should not be viewed in isolation, are not a substitute for GAAP measures and have limitations including, but not limited to, their usefulness as comparative measures as other companies may define their non-GAAP measures differently. | |
| (2 | ) | Return on invested capital is defined as rolling 12 months of Adjusted net income excluding tax-effected interest income and expense divided by invested capital. |
| Lincoln Electric Holdings, Inc. | |||||||||
| Financial Highlights | |||||||||
| (In thousands, except per share amounts) | |||||||||
| (Unaudited) | |||||||||
| Condensed Consolidated Statements of Cash Flows | |||||||||
| Three Months Ended September 30, | |||||||||
| 2016 | 2015 | ||||||||
| OPERATING ACTIVITIES: | |||||||||
| Net income (loss) | $ | 60,049 | $ | (60,466 | ) | ||||
| Non-controlling interests in subsidiaries’ loss | (10 | ) | (15 | ) | |||||
| Net income (loss) including non-controlling interests | 60,039 | (60,481 | ) | ||||||
| Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: | |||||||||
| Rationalization and asset impairment charges | — | 6,090 | |||||||
| Depreciation and amortization | 16,263 | 16,179 | |||||||
| Equity (earnings) loss in affiliates, net | (6 | ) | 236 | ||||||
| Pension expense and settlement charges | 3,216 | 141,244 | |||||||
| Pension contributions and payments | (582 | ) | (4,416 | ) | |||||
| Other non-cash items, net | (1,742 | ) | (46,517 | ) | |||||
| Changes in operating assets and liabilities, net of effects from acquisitions: | |||||||||
| Decrease in accounts receivable | 10,437 | 28,343 | |||||||
| Decrease in inventories | 7,819 | 26,284 | |||||||
| Decrease in trade accounts payable | (8,306 | ) | (3,412 | ) | |||||
| Net change in other current assets and liabilities | 22,417 | 3,197 | |||||||
| Net change in other long-term assets and liabilities | 1,854 | (1,381 | ) | ||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 111,409 | 105,366 | |||||||
| INVESTING ACTIVITIES: | |||||||||
| Capital expenditures | (14,598 | ) | (10,970 | ) | |||||
| Acquisition of businesses, net of cash acquired | — | (33,882 | ) | ||||||
| Proceeds from sale of property, plant and equipment | 257 | 752 | |||||||
| Other investing activities | — | (2,103 | ) | ||||||
| NET CASH USED BY INVESTING ACTIVITIES | (14,341 | ) | (46,203 | ) | |||||
| FINANCING ACTIVITIES: | |||||||||
| Net change in borrowings | 23,989 | 170,371 | |||||||
| Proceeds from exercise of stock options | 4,703 | 564 | |||||||
| Excess tax benefits from stock-based compensation | 1,892 | 194 | |||||||
| Purchase of shares for treasury | (85,661 | ) | (139,337 | ) | |||||
| Cash dividends paid to shareholders | (21,533 | ) | (21,694 | ) | |||||
| Other financing activities | — | (44 | ) | ||||||
| NET CASH (USED BY) PROVIDED BY FINANCING ACTIVITIES | (76,610 | ) | 10,054 | ||||||
| Effect of exchange rate changes on Cash and cash equivalents | (549 | ) | (17,609 | ) | |||||
| INCREASE IN CASH AND CASH EQUIVALENTS | 19,909 | 51,608 | |||||||
| Cash and cash equivalents at beginning of period | 237,019 | 312,737 | |||||||
| Cash and cash equivalents at end of period | $ | 256,928 | $ | 364,345 | |||||
| Cash dividends paid per share | $ | 0.32 | $ | 0.29 | |||||
| Lincoln Electric Holdings, Inc. | ||||||||
| Financial Highlights | ||||||||
| (In thousands, except per share amounts) | ||||||||
| (Unaudited) | ||||||||
| Condensed Consolidated Statements of Cash Flows | Nine Months Ended September 30, | |||||||
| 2016 | 2015 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 145,004 | $ | 78,786 | ||||
| Non-controlling interests in subsidiaries’ loss | (32 | ) | (73 | ) | ||||
| Net income including non-controlling interests | 144,972 | 78,713 | ||||||
| Adjustments to reconcile Net income including non-controlling interests to Net cash provided by operating activities: | ||||||||
| Rationalization and asset impairment charges | — | 6,120 | ||||||
| Loss on deconsolidation of Venezuelan subsidiary | 34,348 | — | ||||||
| Depreciation and amortization | 48,495 | 47,897 | ||||||
| Equity earnings in affiliates, net | (64 | ) | (252 | ) | ||||
| Pension expense and settlement charges | 12,472 | 151,848 | ||||||
| Pension contributions and payments | (22,159 | ) | (52,121 | ) | ||||
| Other non-cash items, net | (7,137 | ) | (52,307 | ) | ||||
| Changes in operating assets and liabilities, net of effects from acquisitions: | ||||||||
| (Increase) decrease in accounts receivable | (11,956 | ) | 14,661 | |||||
| (Increase) decrease in inventories | (7,673 | ) | 27,824 | |||||
| Increase (decrease) in trade accounts payable | 13,922 | (34,629 | ) | |||||
| Net change in other current assets and liabilities | 30,424 | 47,032 | ||||||
| Net change in other long-term assets and liabilities | 1,122 | 650 | ||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 236,766 | 235,436 | ||||||
| INVESTING ACTIVITIES: | ||||||||
| Capital expenditures | (39,377 | ) | (40,187 | ) | ||||
| Acquisition of businesses, net of cash acquired | (71,567 | ) | (33,882 | ) | ||||
| Proceeds from sale of property, plant and equipment | 936 | 2,173 | ||||||
| Other investing activities | (283 | ) | (79 | ) | ||||
| NET CASH USED BY INVESTING ACTIVITIES | (110,291 | ) | (71,975 | ) | ||||
| FINANCING ACTIVITIES: | ||||||||
| Net change in borrowings | 183,259 | 314,420 | ||||||
| Proceeds from exercise of stock options | 10,418 | 4,600 | ||||||
| Excess tax benefits from stock-based compensation | 3,414 | 1,487 | ||||||
| Purchase of shares for treasury | (288,594 | ) | (297,804 | ) | ||||
| Cash dividends paid to shareholders | (66,180 | ) | (65,942 | ) | ||||
| Other financing activities | (18,244 | ) | (8,040 | ) | ||||
| NET CASH USED BY FINANCING ACTIVITIES | (175,927 | ) | (51,279 | ) | ||||
| Effect of exchange rate changes on Cash and cash equivalents | 2,197 | (26,216 | ) | |||||
| (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (47,255 | ) | 85,966 | |||||
| Cash and cash equivalents at beginning of period | 304,183 | 278,379 | ||||||
| Cash and cash equivalents at end of period | $ | 256,928 | $ | 364,345 | ||||
| Cash dividends paid per share | $ | 0.96 | $ | 0.87 | ||||
| Lincoln Electric Holdings, Inc. | ||||||||||||||||||||
| Segment Highlights (1) | ||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Americas Welding | International Welding | The HarrisProductsGroup | Corporate /Eliminations | Consolidated | ||||||||||||||||
| Three months ended September 30, 2016 | ||||||||||||||||||||
| Net sales | $ | 377,520 | $ | 119,564 | $ | 70,562 | $ | — | $ | 567,646 | ||||||||||
| Inter-segment sales | 22,386 | 3,688 | 1,856 | (27,930 | ) | — | ||||||||||||||
| Total | $ | 399,906 | $ | 123,252 | $ | 72,418 | $ | (27,930 | ) | $ | 567,646 | |||||||||
| EBIT (2) | $ | 68,285 | $ | 5,796 | $ | 8,757 | $ | 913 | $ | 83,751 | ||||||||||
| As a percent of total sales | 17.1 | % | 4.7 | % | 12.1 | % | 14.8 | % | ||||||||||||
| Special items charge (3) | — | — | — | — | — | |||||||||||||||
| Adjusted EBIT (4) | $ | 68,285 | $ | 5,796 | $ | 8,757 | $ | 913 | $ | 83,751 | ||||||||||
| As a percent of total sales | 17.1 | % | 4.7 | % | 12.1 | % | 14.8 | % | ||||||||||||
| Three months ended September 30, 2015 | ||||||||||||||||||||
| Net sales | $ | 454,172 | $ | 128,072 | $ | 62,922 | $ | — | $ | 645,166 | ||||||||||
| Inter-segment sales | 25,571 | 5,400 | 2,307 | (33,278 | ) | — | ||||||||||||||
| Total | $ | 479,743 | $ | 133,472 | $ | 65,229 | $ | (33,278 | ) | $ | 645,166 | |||||||||
| EBIT (2) | $ | (83,413 | ) | $ | (5,676 | ) | $ | 6,422 | $ | (748 | ) | $ | (83,415 | ) | ||||||
| As a percent of total sales | (17.4 | %) | (4.3 | %) | 9.8 | % | (12.9 | %) | ||||||||||||
| Special items charge (3) | 166,178 | 14,944 | — | — | 181,122 | |||||||||||||||
| Adjusted EBIT (4) | $ | 82,765 | $ | 9,268 | $ | 6,422 | $ | (748 | ) | $ | 97,707 | |||||||||
| As a percent of total sales | 17.3 | % | 6.9 | % | 9.8 | % | 15.1 | % | ||||||||||||
| Nine months ended September 30, 2016 | ||||||||||||||||||||
| Net sales | $ | 1,124,900 | $ | 376,684 | $ | 209,202 | $ | — | $ | 1,710,786 | ||||||||||
| Inter-segment sales | 69,673 | 11,955 | 6,983 | (88,611 | ) | — | ||||||||||||||
| Total | $ | 1,194,573 | $ | 388,639 | $ | 216,185 | $ | (88,611 | ) | $ | 1,710,786 | |||||||||
| EBIT (2) | $ | 194,924 | $ | 21,699 | $ | 25,752 | $ | (32,536 | ) | $ | 209,839 | |||||||||
| As a percent of total sales | 16.3 | % | 5.6 | % | 11.9 | % | 12.3 | % | ||||||||||||
| Special items charge (3) | — | — | — | 34,348 | 34,348 | |||||||||||||||
| Adjusted EBIT (4) | $ | 194,924 | $ | 21,699 | $ | 25,752 | $ | 1,812 | $ | 244,187 | ||||||||||
| As a percent of total sales | 16.3 | % | 5.6 | % | 11.9 | % | 14.3 | % | ||||||||||||
| Nine months ended September 30, 2015 | ||||||||||||||||||||
| Net sales | $ | 1,354,010 | $ | 409,246 | $ | 204,550 | $ | — | $ | 1,967,806 | ||||||||||
| Inter-segment sales | 72,496 | 15,738 | 7,034 | (95,268 | ) | — | ||||||||||||||
| Total | $ | 1,426,506 | $ | 424,984 | $ | 211,584 | $ | (95,268 | ) | $ | 1,967,806 | |||||||||
| EBIT (2) | $ | 71,423 | $ | 15,036 | $ | 22,221 | $ | (54 | ) | $ | 108,626 | |||||||||
| As a percent of total sales | 5.0 | % | 3.5 | % | 10.5 | % | 5.5 | % | ||||||||||||
| Special items charge (3) | 166,178 | 16,183 | — | — | 182,361 | |||||||||||||||
| Adjusted EBIT (4) | $ | 237,601 | $ | 31,219 | $ | 22,221 | $ | (54 | ) | $ | 290,987 | |||||||||
| As a percent of total sales | 16.7 | % | 7.3 | % | 10.5 | % | 14.8 | % | ||||||||||||
| (1 | ) | As previously announced on February 9, 2016, the Company realigned its organizational structure into three operating segments which was effective beginning in the first quarter of 2016. | |
| (2 | ) | EBIT is defined as Operating income plus Equity earnings in affiliates and Other income. | |
| (3 | ) | Special items within Corporate/Elimination reflect a charge ($34.1 million non-cash) related to the deconsolidation of the Company's Venezuelan subsidiary in the second quarter 2016. Refer to 'Non-GAAP Financial Measures' for detail on excluded special items. | |
| (4 | ) | The primary profit measure used by management to assess segment performance is Adjusted EBIT. EBIT for each operating segment is adjusted for special items to derive Adjusted EBIT. |
| Lincoln Electric Holdings, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in Net Sales by Segment | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30th Change in Net Sales by Segment | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in Net Sales due to: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Sales 2015 | Volume | Acquisitions | Price | ForeignExchange | Net Sales 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
| Operating Segments | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Americas Welding | $ | 454,172 | $ | (81,338 | ) | $ | 12,300 | $ | (5,645 | ) | $ | (1,969 | ) | $ | 377,520 | |||||||||||||||||||||||||||||||||||||
| International Welding | 128,072 | (6,322 | ) | 1,454 | (1,255 | ) | (2,385 | ) | 119,564 | |||||||||||||||||||||||||||||||||||||||||||
| The Harris Products Group | 62,922 | 5,235 | — | 2,226 | 179 | 70,562 | ||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | $ | 645,166 | $ | (82,425 | ) | $ | 13,754 | $ | (4,674 | ) | $ | (4,175 | ) | $ | 567,646 | |||||||||||||||||||||||||||||||||||||
| Americas Welding (excluding Venezuela) | $ | 419,483 | $ | (46,648 | ) | $ | 12,300 | $ | (5,646 | ) | $ | (1,969 | ) | $ | 377,520 | |||||||||||||||||||||||||||||||||||||
| Consolidated (excluding Venezuela) | $ | 610,476 | $ | (47,734 | ) | $ | 13,754 | $ | (4,674 | ) | $ | (4,176 | ) | $ | 567,646 | |||||||||||||||||||||||||||||||||||||
| % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Americas Welding | (17.9 | %) | 2.7 | % | (1.2 | %) | (0.4 | %) | (16.9 | %) | ||||||||||||||||||||||||||||||||||||||||||
| International Welding | (4.9 | %) | 1.1 | % | (1.0 | %) | (1.9 | %) | (6.6 | %) | ||||||||||||||||||||||||||||||||||||||||||
| The Harris Products Group | 8.3 | % | — | 3.5 | % | 0.3 | % | 12.1 | % | |||||||||||||||||||||||||||||||||||||||||||
| Consolidated | (12.8 | %) | 2.1 | % | (0.7 | %) | (0.6 | %) | (12.0 | %) | ||||||||||||||||||||||||||||||||||||||||||
| Americas Welding (excluding Venezuela) | (11.1 | %) | 2.9 | % | (1.3 | %) | (0.5 | %) | (10.0 | %) | ||||||||||||||||||||||||||||||||||||||||||
| Consolidated (excluding Venezuela) | (7.8 | %) | 2.3 | % | (0.8 | %) | (0.7 | %) | (7.0 | %) | ||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30th Change in Net Sales by Segment | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in Net Sales due to: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Sales 2015 | Volume | Acquisitions | Price | Foreign Exchange | Net Sales 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
| Operating Segments | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Americas Welding | $ | 1,354,010 | $ | (226,400 | ) | $ | 35,600 | $ | 268,381 | $ | (306,691 | ) | $ | 1,124,900 | ||||||||||||||||||||||||||||||||||||||
| International Welding | 409,246 | (21,256 | ) | 8,622 | (8,243 | ) | (11,685 | ) | $ | 376,684 | ||||||||||||||||||||||||||||||||||||||||||
| The Harris Products Group | 204,550 | 7,361 | — | (987 | ) | (1,722 | ) | $ | 209,202 | |||||||||||||||||||||||||||||||||||||||||||
| Consolidated | $ | 1,967,806 | $ | (240,295 | ) | $ | 44,222 | $ | 259,151 | $ | (320,098 | ) | $ | 1,710,786 | ||||||||||||||||||||||||||||||||||||||
| Americas Welding (excluding Venezuela) | $ | 1,273,090 | $ | (172,465 | ) | $ | 35,600 | $ | (7,698 | ) | $ | (14,441 | ) | $ | 1,114,086 | |||||||||||||||||||||||||||||||||||||
| Consolidated (excluding Venezuela) | $ | 1,886,886 | $ | (186,360 | ) | $ | 44,222 | $ | (16,927 | ) | $ | (27,848 | ) | $ | 1,699,973 | |||||||||||||||||||||||||||||||||||||
| % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Americas Welding | (16.7 | %) | 2.6 | % | 19.8 | % | (22.7 | %) | (16.9 | %) | ||||||||||||||||||||||||||||||||||||||||||
| International Welding | (5.2 | %) | 2.1 | % | (2.0 | %) | (2.9 | %) | (8.0 | %) | ||||||||||||||||||||||||||||||||||||||||||
| The Harris Products Group | 3.6 | % | — | (0.5 | %) | (0.8 | %) | 2.3 | % | |||||||||||||||||||||||||||||||||||||||||||
| Consolidated | (12.2 | %) | 2.2 | % | 13.2 | % | (16.3 | %) | (13.1 | %) | ||||||||||||||||||||||||||||||||||||||||||
| Americas Welding (excluding Venezuela) | (13.5 | %) | 2.8 | % | (0.6 | %) | (1.1 | %) | (12.5 | %) | ||||||||||||||||||||||||||||||||||||||||||
| Consolidated (excluding Venezuela) | (9.9 | %) | 2.3 | % | (0.9 | %) | (1.5 | %) | (9.9 | %) | ||||||||||||||||||||||||||||||||||||||||||
Contact Amanda Butler Director, Investor Relations Tel: 216.383.2534 Email: [email protected]Source: Lincoln Electric Holdings, Inc.